By Vince Andrich, founder of Andrich Fitness Group
A product portfolio audit answers one question: which of your products deserve the next dollar, and which ones are spending it? Most brands cannot answer that with numbers. They know total revenue, they know the blended margin, and they know which product the founder loves. They do not know which SKU is carrying the business and which one is being carried.
That gap is expensive. Every product you sell takes a share of your cash, your production runs, your marketing and your buyer’s attention. When those are spread evenly across a line, the products that could win never get enough to do it.
This guide explains what a product portfolio audit is, why brands need one, what it measures, what decisions come out of it, and how to tell whether you can run it yourself or should bring someone in.
The short version
- A product portfolio audit is a structured review that scores every SKU on financial performance, channel behavior, customer acquisition and consumer retention, then assigns each one a decision: keep, invest, fix, harvest or exit.
- Unplanned SKUs do not mean more revenue. Extensions added one at a time, without a ranking behind them, usually mean more complexity and less margin per product.
- Blended margin hides the problem. One or two SKUs are often subsidizing the rest, and you only see it when you break margin out by SKU and by channel.
- Revenue alone is the wrong ranking. Velocity, repeat purchase and promo dependence tell you whether demand is real.
- The product hurting you most is rarely the worst seller. It is the one doing “okay” that nobody questions.
- An audit is not a cost-cutting exercise. The result is focus: cash, marketing and shelf space concentrated on the products with a right to win. Sometimes that means more SKUs, as deliberate segments of your best seller.
- Do it before a line review, a retail or international expansion, a capital raise or a new product launch.
In this guide
- What is a product portfolio audit?
- Why do brands end up with too many SKUs?
- What does an unaudited portfolio cost you?
- What are the signs you need a portfolio audit?
- What does a product portfolio audit measure?
- What decisions come out of the audit?
- Which SKUs should you not cut?
- When should you run a portfolio audit?
- Can you run a portfolio audit yourself?
- How does Andrich Fitness Group run a Product Portfolio Audit?
- Frequently asked questions
- Book a discovery call
What is a product portfolio audit?
A product portfolio audit is a SKU-by-SKU review of everything a brand sells, scored on the same set of metrics and ranked against each other, ending in a written decision for every product. It tells you which products to protect, which to put money behind, which to repair and which to stop making.
Three things separate an audit from a sales report:
- It scores every SKU on the same terms. Revenue, margin, velocity, repeat rate and promotion are measured the same way for each product, so they can be compared.
- It looks at channels separately. A product can be healthy on your website and unprofitable at retail, or the reverse. A blended number hides both.
- It ends in decisions. A report describes what happened. An audit says what to do, who owns it and by when.
Portfolio audit vs. SKU rationalization
The two terms get used as if they mean the same thing. They do not. SKU rationalization is the act of reducing a line. Circana defines it as the strategic review of a brand’s product lineup to determine which SKUs should be kept, improved or discontinued (Circana). A portfolio audit is the diagnosis that comes first. Cutting is one possible outcome. Investing more in a product you have been starving is another, and it is often the more valuable one.
The question founders ask first
I often get founders who ask, “So the portfolio audit is a great way to cut slow-selling SKUs and save money on inventory?” I say no, it isn’t.
The result is focus. Often that means segmenting your best seller, which can lead to more SKUs, but with much greater category relevance and consumer coverage.
Why do brands end up with too many SKUs?
Because every individual launch makes sense at the time. Nobody decides to build a bloated line. It happens one reasonable decision at a time:
- Flavor and size extensions. The fastest way to show a retailer or a customer something new.
- Retailer requests. An exclusive size or flavor to win one account, which then has to be cut or produced long term.
- Competitor matching. A rival launches a product, so you launch one too.
- Founder favorites. The product someone championed and nobody wants to be the one to kill.
- Launches as a growth plan. When the core product slows, a new product feels like the answer. Often the better move is to segment the product you already have.
The pattern is well documented in large companies. McKinsey describes one global food manufacturer whose leading North American business unit grew its SKU count by 66% in three years while sales per SKU fell by 40%. The same article estimates that complexity costs US food and beverage manufacturers as much as $50 billion in gross profit (McKinsey).
A $10 million brand has the same problem at a smaller scale and with less room for error. A large company can absorb a weak SKU. A growing brand funds it out of the same cash it needs for its best product.
What does an unaudited portfolio cost you?
It costs you margin, cash, focus and credibility with buyers, and most of it never shows up as a line on the P&L. The costs are spread across the business, which is why they go unchallenged.
Margin you cannot see
A blended gross margin can look acceptable while one or two SKUs quietly subsidize the rest. The weak ones are usually not the obvious failures. They are the products doing “okay”: they move, they generate no complaints, and they sit in the report without drawing a question. We covered that pattern in The SKU That’s Quietly Killing Your Margins.
Cash tied up in the wrong inventory
Every SKU carries minimum order quantities, raw materials, packaging and finished goods. Slow products tie up cash for months and often end in a markdown or a write-off. Meanwhile the best seller goes out of stock because the purchase order was sized to what was left.
Marketing spread too thin
When spend is scattered across the line, every dollar works less hard than it should. A hero product wins by getting a disproportionate share of attention. A portfolio with no declared hero gives every product an equal share of too little.
A weaker buyer conversation
Retail buyers do not want your whole line. They want the two or three SKUs that will turn. If you cannot say which product is your anchor and prove it, you lose the conversation before it starts. Our guide to taking your brand to retail covers what buyers expect in more detail.
A diluted message
The more products you sell, the harder it is to say what the brand is for. A clear portfolio makes the message easier: one product that represents the brand today, and one that shows where it is going. That is the hero and halo structure.
What the large companies found
The biggest consumer companies have run this exercise in public, and the results point the same way.
- Coca-Cola. In 2020 the company said it had more than 400 brands, and that more than half were single-country brands with little to no scale, together making up about 2% of revenue. Its CEO described the plan as prioritizing “fewer but bigger and stronger brands” and exiting some “zombie brands not just zombie SKUs” (Supply Chain Dive).
- Unilever. Its 2024 results credit a strategy of doing “fewer things, better.” Its 30 Power Brands delivered more than 75% of turnover, and gross margin rose 280 basis points to 45.0% (Unilever).
- McKinsey’s benchmark. A well-run complexity program can deliver a net revenue increase of 1 to 4 percentage points and margin improvement of 3 to 6 percentage points while trimming SKU count by about 25% (McKinsey).
These are large-company figures, and many things besides SKU count drove them. Read them as direction, not as a forecast for your brand. The point is that focus has paid at every scale where it has been measured.
What are the signs you need a portfolio audit?
You need a portfolio audit when you are making product decisions without a ranking you trust. Five signs show up most often.
- You cannot name your real hero. Revenue is spread across the line and no single product is dominant enough to drive the brand. Everything is “doing okay,” which means nothing is winning.
- Gross margin is eroding and you do not know which SKU is responsible. The blended number looks fine. The channel-level breakdown would tell a different story if you had it.
- Restocking and production decisions run on gut feel. You carry too much of the wrong products and not enough of the right ones.
- Retail buyers are asking you to simplify. Category managers want focus, and you do not know where to start.
- You are spending on marketing without knowing which product to get behind. Spend follows the calendar or the newest launch, not the product most likely to return it.
If two or more of these sound familiar, the audit will pay for itself in decisions you are currently making blind.
What does a product portfolio audit measure?
A product portfolio audit measures each SKU across three layers: financial performance, channel behavior and consumer retention. We use eight metrics. No single one decides a product’s fate. The pattern across all eight does.
| Metric | Layer | What it reveals |
|---|---|---|
| Net revenue and unit volume | Financial | The absolute dollar and unit contribution of each SKU to the business |
| Gross margin %, blended and by channel | Financial | Which SKUs are actually profitable, and which routes to market are eroding margin |
| Velocity per store or per listing | Channel | How fast each SKU moves, independent of how widely it is distributed |
| Revenue and units by channel | Channel | Whether a SKU is weak everywhere or only weak in one route to market |
| Repeat purchase rate | Consumer | Whether first-time buyers come back, the clearest signal of product-market fit |
| New-to-file % | Consumer | Which SKUs recruit new customers and which only sell to existing ones |
| Promo dependence | Financial | SKUs that only move on deal, a structural profitability problem |
| Cannibalization risk | Consumer | SKUs competing with each other for the same buyer, format or channel position |
Why revenue is the wrong ranking
Revenue is partly a function of distribution. A product in 2,000 stores will outsell a product in 200 even if shoppers prefer the second one. Velocity corrects for that by measuring sales per store or per listing. A SKU with modest revenue and high velocity is under-distributed, and that is an opportunity. A SKU with high revenue and low velocity is living on its distribution, and that is a risk at the next line review.
Why margin has to be read by channel
The same product earns a different margin on your website, on Amazon, through a distributor and direct to a retail chain. Fees, trade spend, freight and returns all differ. A SKU that looks profitable in the blend can be losing money in the channel where it sells the most units.
Why repeat rate outranks everything else
A product people buy once is a marketing expense. A product people buy again is a business. Repeat purchase rate has to be measured by SKU, because a blended rate lets one strong product hide several weak ones.
An illustrative scorecard
The table below is an invented six-SKU supplement brand, not a client. It shows how the picture changes when you look past revenue.
| SKU | Share of revenue | Gross margin | Velocity vs. category | Repeat rate | New-to-file | Decision |
|---|---|---|---|---|---|---|
| Pre-workout, core flavor | 34% | 58% | Above | High | Medium | Invest |
| Protein, 4 lb | 22% | 41% | At | High | Low | Keep |
| Creatine | 14% | 52% | Above | High | Low | Keep |
| Protein, 2 lb | 12% | 31% | At | Medium | High | Keep |
| Fat burner | 11% | 44% | Below | Low | Low | Harvest |
| BCAA | 7% | 38% | Below | Low | Low | Exit |
Ranked by revenue, the 2 lb protein sits fourth, with the lowest margin in the line. A simple cutoff would remove it. The new-to-file column says it is how new customers enter the protein range, so it stays. The fat burner looks healthier on revenue and margin, but few buyers come back and it recruits almost no one. It is the “okay” SKU, and it is the one to harvest. A revenue report raises neither question.
What decisions come out of the audit?
Every SKU gets one of five decisions: keep, invest, fix, harvest or exit. There are no gray areas and no “monitor.” A product that cannot be placed has not been analyzed enough.
| Decision | What it means | What you do |
|---|---|---|
| Keep | Strong fundamentals | Protect and maintain. Do not over-engineer it |
| Invest | Clear upside with the right commercial support | Get behind it with marketing, inventory and distribution |
| Fix | Underperforming but salvageable | Diagnose the cause, whether price, pack, positioning or channel, and set a deadline |
| Harvest | Past its window | Stop investing, extract the remaining margin, then exit |
| Exit | Structurally unprofitable | Discontinue and reallocate the resources |
If you have read our earlier piece, Every SKU Belongs in One of Three Buckets, these are the same three decisions with timing added. Keep is the steady-state version of invest. Harvest is the slow version of exit. In a leadership meeting, three buckets are enough. In an operating plan, the two extra ones tell your team how fast to move.
Why aggregate sales can mislead: two examples
Raw sales in aggregate can point you at the wrong decision. Two examples from my own experience.
A flavor below the cutoff. We had a black cherry pre-workout flavor that fell under 10% of all pre-workout flavor sales, which was our cutoff to discontinue. On Amazon, though, it was the number one product for new customers, and over 24% of them went on to make a second purchase of a different SKU. By the sales rule it was an exit. The customer data said it was one of the best recruiters in the line.
We kept it. It pulled well on Amazon, and we believed the reason was that black cherry is a familiar flavor that still sounds a bit fun. We also found that some really exotic flavors are too polarizing or too uncommon, and consumers do not want to gamble on them.
A size with weak margin. With our 2 lb protein, gross margin was low and sales trailed the 4 lb. But the 2 lb size accounted for over 70% of new protein customers, because of the price point. We made an even smaller 1.5 lb size and attracted 23% more new protein customers.
Neither product would have survived a ranking by revenue or margin alone. That is why the scorecard measures new-to-file and what those customers buy next, and why the decision comes from the pattern across the metrics, not from one number.
A fix is often the positioning, not the product
Another real example shows what “fix” can mean. A brand with a line of meal supplements made one for women only. It failed. We kept the same formula, put it in new packaging and relaunched it as a Lite version. It was a huge success: men used it too, and women did not see it as a diluted version of the original.
The formula never changed. The name and the packaging did, and with them who the product was for. A scorecard that only said “exit” would have thrown away a product the market wanted under a different name.
A decision needs an owner and a date
The scorecard is the analysis. The decision log is what changes the business. For each SKU it records the decision, who owns it, the timeline and what it means for each channel: which accounts need notice, what inventory has to sell through, and where the freed-up cash and shelf space go. Without that, an audit becomes one more deck.
Which SKUs should you not cut?
Do not cut a SKU on low revenue alone. Some low-volume products earn their place in ways a sales ranking does not show. Check four things before any product goes on the exit list.
- Is the demand transferable? If a shopper who loses this product will buy another of yours, the cut is safe. If they leave the brand, the SKU is incremental and should probably stay. Circana makes the same distinction between transferable demand and true incrementality (Circana).
- Who buys it? A niche product with low velocity can still attract your most loyal customer, the one who builds a large basket around it.
- What job does it do for the brand? A halo product is low volume by design. It signals where the brand is going and gives the hero credibility. Judge it on that role, not on units.
- Does an account depend on it? Some SKUs hold a shelf position or satisfy a retailer requirement. Cutting them can cost you facings that the remaining products do not win back.
There is also a limit to what cutting achieves. Boston Consulting Group points out that SKUs account for only a small proportion of complexity costs, and quotes one executive who cut SKUs by 60% without changing the underlying churn (BCG). If the habits that created the bloat stay in place, the line grows back. That is why the audit should end with rules for what gets launched next, not only a list of what gets removed.
When should you run a portfolio audit?
Run a portfolio audit before any decision that commits cash or reputation to your line as it stands today. Five moments matter most.
- Before a retail line review. You get one meeting, often once a year. Walk in knowing which SKUs you are leading with and which you are offering to swap out.
- Before expanding into a new channel or country. New markets multiply whatever you bring. Decide which products travel before you quote a distributor or a licensee. See our guide to taking your brand international.
- Before a new product launch. A launch draws cash and attention from the existing line. Know what it will take from, and whether the existing product could do the job with a different position.
- Before raising capital or selling. Investors and acquirers will run this analysis on you. It is better to have already made the decisions it points to.
- When margin slips for two quarters in a row. Something in the mix has changed. The audit finds out what.
After the first one, a lighter review once or twice a year keeps the scorecard current and stops the line from drifting back.
Can you run a portfolio audit yourself?
Yes, if you have clean data and someone willing to make unpopular calls. The method is not secret. What stops most internal audits is not the math.
The data you need
- Sales by SKU and by channel for the last 12 to 24 months, in units and net dollars
- Cost of goods by SKU, including packaging and freight in
- Channel costs: marketplace fees, distributor and retailer margins, trade spend, chargebacks and returns
- Promotional calendar and the share of units sold on deal
- Store or listing counts, to calculate velocity
- Customer-level order data from your own site, to calculate repeat rate and new-to-file by SKU
- Inventory on hand and on order by SKU
Where internal audits break down
- Politics. Every weak SKU has a sponsor. The person who launched it is usually in the room.
- Blended numbers. Finance reports margin for the company, not by SKU and channel, and nobody has time to rebuild it.
- No benchmark. Without category context it is hard to say whether a 30% repeat rate or a given velocity is good.
- No decision. The analysis gets presented, discussed and filed. Nothing is discontinued.
An outside audit is worth paying for when one of those four is in the way. The value is partly the analysis and partly having someone with no stake in any product say what the numbers say.
How does Andrich Fitness Group run a Product Portfolio Audit?
Andrich Fitness Group runs the Product Portfolio Audit for health, performance and functional CPG brands with three or more SKUs and real revenue. We score every product, assign every product a decision, and hand you the plan to act on it. We take a limited number of engagements at a time.
Why us: over 25+ years inside the growth engines of Quest Nutrition, Bang Energy and JYM Supplement Science, I’ve developed and managed the operational programs and frameworks that drive championship brands, making exactly these decisions as the operator accountable for the P&L. SKU rationalization is not an academic exercise for us. It is how we have helped brands stop bleeding margin on the wrong products and concentrate resources on the ones with a real right to win.
How the engagement runs
- Free discovery call, 30 minutes. We review your portfolio, your channels and your current commercial challenges, confirm fit, and scope the engagement to your number of SKUs.
- Data intake. You share your sales reports, channel data and margin information. We ask for exactly what we need and nothing more.
- The audit. We build your full SKU scorecard, run the analysis and assign every product to a decision. You run your business while we do the work.
- Readout and decision log. You receive the written scorecard, decision log and action tracker, followed by a 45-minute readout call.
What you receive
- A full SKU scorecard covering financial, channel and consumer metrics
- A keep, invest, fix, harvest or exit decision for every product in your lineup
- A decision log with owner, timeline and channel implications
- An executive summary: revenue at risk, margin lift and complexity reduction
- A 45-minute readout call with a personal walkthrough of the findings
The right fit
- A health, performance or functional CPG brand with three or more SKUs
- Existing revenue, so there is real data to work with
- A founder or CEO engaged in the process, not delegating it
- A team feeling the strain of too many products and not enough clarity
- Readiness to make real decisions, including discontinuing products
Not the right fit
- Pre-revenue or single-SKU brands
- Teams not willing to share sales and margin data
- Brands looking for validation, not honest analysis
- Anyone expecting a recommendation to keep everything
Pricing is scoped to the size of your portfolio and confirmed on the discovery call.
Frequently asked questions
What is a product portfolio audit?
A product portfolio audit is a structured review that scores every SKU a brand sells on financial performance, channel behavior and consumer retention, ranks the products against each other, and assigns each one a decision: keep, invest, fix, harvest or exit.
What is the difference between a portfolio audit and SKU rationalization?
A portfolio audit is the diagnosis. SKU rationalization is one possible outcome, the act of reducing the line. An audit can just as easily conclude that a product deserves more investment, not removal.
How many SKUs is too many?
There is no fixed number. A line is too long when you cannot fund, market and keep in stock every product you sell, or when you cannot name your hero product. Three SKUs can be too many if one of them is draining the other two.
Which metrics matter most in a SKU audit?
Gross margin by SKU and by channel, velocity per store or per listing, and repeat purchase rate. Revenue alone is misleading because it reflects distribution as much as demand. Promo dependence, new-to-file percentage and cannibalization complete the picture.
Will cutting SKUs reduce my revenue?
It can in the short term, but usually by less than the product’s sales, because some buyers switch to another of your products. McKinsey reports that well-run complexity programs have increased net revenue by 1 to 4 percentage points while trimming SKU count by about 25%. Check whether demand is transferable before cutting.
Which SKUs should I keep even if they sell slowly?
Keep slow sellers that bring in customers who would otherwise leave the brand, that attract your most loyal buyers, that act as a halo product signaling where the brand is going, or that hold a shelf position an account depends on.
How often should a brand audit its product portfolio?
Run a full audit before a retail line review, a channel or international expansion, a new product launch or a capital raise, and whenever margin slips for two quarters in a row. After the first one, a lighter review once or twice a year keeps it current.
What data do I need for a product portfolio audit?
Sales by SKU and channel for the last 12 to 24 months, cost of goods by SKU, channel costs such as fees, trade spend and returns, the promotional calendar, store or listing counts, customer-level order data for repeat rate, and inventory on hand and on order.
How much does a Product Portfolio Audit cost?
Andrich Fitness Group scopes pricing to the size of the portfolio, based on the number of SKUs. The scope and price are confirmed on a free 30-minute discovery call.
Who is a Product Portfolio Audit for?
Health, performance and functional CPG brands with three or more SKUs and existing revenue, led by a founder or CEO who is ready to make real decisions, including discontinuing products. It is not a fit for pre-revenue or single-SKU brands.
Book a discovery call
You cannot scale everything. The brands that grow are the ones that decide which product gets the bet, and stop paying for the ones that do not.
If you run a health, performance or functional CPG brand with three or more SKUs, book a free 30-minute discovery call. We will review your portfolio, confirm fit and scope the engagement together. No pitch and no commitment.
See the full Product Portfolio Audit program
Sources
- Simpler Is (Sometimes) Better: Managing Complexity in Consumer Goods (McKinsey): SKU proliferation, cost of complexity, benefits of reducing it
- Coca-Cola Expands “Ruthless” SKU Rationalization Strategy (Supply Chain Dive): brand count, share of revenue, CEO comments
- Unilever Full Year 2024 Results (Unilever): Power Brands share of turnover, gross margin
- SKU Rationalization for Growing Brands (Circana): definition, transferable demand and incrementality
- Managing Complexity for Superior Value (Boston Consulting Group): limits of cutting SKUs alone
- Product Portfolio Audit (Andrich Fitness Group): scorecard, decisions, process and fit
